Dan Slater: Could China Become Another Japan?

A new book raises the grim possibility China could ‘turn inwards’ and end up like Japan. From financeasia.com:

China’s decision not to allow Coca Cola to buy local soft drinks champion Huiyuan Juice, announced on March 18, and the latest World Bank report predicting growth will slow to 6.5% from the previously forecast 7.5%, has caused some commentators to wonder whether China could turn inwards. The fear is that China could turn away from its relatively open economic model and copy Japan’s ‘mercantilist’ model, defined as manipulating the terms of trade in one’s favour through currency depreciation and non-tariff barriers to imports and investments, and thus ‘stealing’ growth from one’s neighbours.

Japan has a total trade-to-GDP ratio of just 18%, and the stock of foreign direct investment represents a truly lamentable 1%. With only 2 million registered foreigners, Japan is the least welcoming country in the Organisation of Economic Cooperation and Development (OECD), with a ratio of 1.5% foreigners to the total population. Compare that to 10% in Spain, or even Germany, which has 16 million foreign residents in a population of 85 million.